Beacon Broadside: A Project of Beacon Presstag:typepad.com,2003:weblog-14005452019-01-09T17:23:15-05:00Ideas, opinions, and personal essays from respected writers, thinkers, and activists. A project of Beacon Press, an independent publisher of progressive ideas since 1854.TypePadRaking in Resentment While Raking in Big Bucks: A Case for the Rich Paying Their Fair Sharetag:typepad.com,2003:post-6a00e54ed2b7aa8833022ad38715e6200c2019-01-09T17:23:15-05:002019-01-09T17:33:43-05:00By Linda McQuaig and Neil Brooks | After years of basking in the glow of a flattering limelight, by the fall of 2011 the very rich were experiencing something new and altogether jarring: the glare of a harsh spotlight trained directly on them. The temptation to bark orders like: “Dim that light, or else!” was natural enough, but perhaps unwise. After all, those shining the spotlight were not their employees and were swarming in large numbers through the streets of lower Manhattan, behaving like the sort of unruly mob one finds in faraway places where the ways of the free world are insufficiently appreciated.Beacon Broadside

It would be one of the boldest moves in progressive taxation we’d see in the twenty-first century. Congresswoman Alexandria Ocasio-Cortez suggested raising the tax rate on the wealthy to seventy percent. The proceeds would back the goals of the Green New Deal Ocasio-Cortez and other Democrats have proposed. Garnering praise and skepticism, her radical tax plan has brought our attention back to how our country has and has not taxed the One Percent. In their book Billionaires’ Ball: Gluttony and Hubris in an Age of Epic Inequality, Linda McQuaig and Neil Brooks explain how billionaires and Wall Street earned a bad reputation and fierce criticism, and why the rest of the country is eager for them, as Ocasio-Cortez put it, “to pay their fair share in taxes.”

***

After years of basking in the glow of a flattering limelight, by the fall of 2011 the very rich were experiencing something new and altogether jarring: the glare of a harsh spotlight trained directly on them. The temptation to bark orders like: “Dim that light, or else!” was natural enough, but perhaps unwise. After all, those shining the spotlight were not their employees and were swarming in large numbers through the streets of lower Manhattan, behaving like the sort of unruly mob one finds in faraway places where the ways of the free world are insufficiently appreciated.

All of a sudden, right here in America, being wondrously, fulsomely, voluptuously rich was no longer a badge of honor, something to announce gleefully to the world by squealing the tires of one’s Lamborghini at pedestrians who were in the way. Wall Street—the nexus of ambition, brains, greed, glamour, the very g-spot of the American Dream—was no longer something to be glorified, but rather occupied.

Where would it end? Could the trappings of wealth become a source of embarrassment? Could the day come when a yacht became like a fur coat—one of life’s small pleasures ruined by the prospect that wearing it (or docking it) might attract a crowd of protestors? Imagine a protestor so mean-spirited that she would object to the sight of a banker lounging on a pleasure craft massively larger than the house she had once owned but that now belonged to . . . a bank.

Of course, it could be worse. Luckily for the bankers, the occupiers were a little fuzzy in their targeting, going broadly after the top 1 percent, apparently unaware that the real red meat was much higher up the food chain—the top .01 percent, the top .001 percent, or all the way up to the dizzying heights occupied (in this case appropriately so) by billionaires.

Anyway, help was on the way. Already, the lobbying industry was swinging into action. By late November 2011, one of the leading Washington lobby firms—Clark, Lytle, Geduldig & Cranford—had prepared a memo for the American Bankers Association (leaked to the press by some mean-spirited soul), which laid out a media strategy for countering the Occupy Wall Street juggernaut.

The lobbyists insisted that the answer lay in a carefully prepared counter-campaign aimed at slinging mud at the motives of the occupiers: “If we can show they have the same cynical motivation as a political opponent, it will undermine their credibility in a profound way.” (It’s tough to imagine what cynical motivation might lead people to live in water-soaked tents for weeks on end.)

The danger was that the anti–Wall Street message, if unchallenged, could turn the big Wall Street banks into fodder for the Democratic political machine—and worse. As the memo noted: “The bigger concern should be that Republicans will no longer defend Wall Street companies—and might start running against them too.”

The lobbyists even raised the prospect of the Tea Party crowd joining in some kind of a Right-Left populist free-for-all of bank-bashing: “The combination has the potential to be explosive later in the year when media reports cover the next round of bonuses and contrast it with stories of millions of Americans making do with less this holiday season.” (It’s gratifying to see that, even when they’re plotting the destruction of a democratic movement, lobbyists now use inclusive language about the “holiday season.”)

All this looming victimization was no doubt baffling to members of the financial elite, who still had trouble grasping the notion that they were somehow supposed to feel culpable for the 2008 financial crash.

That bewilderment had been evident as early as January 2009, only months after the crash, at the elite gathering in the Swiss town of Davos, where bankers, business leaders, political shakers, and other big thinkers come together every year to celebrate the globalized world of liberated financial markets, shrunken government, and reinvigorated capitalism. Of course, some bewilderment was inevitable in Davos that year, with even questions popping up about why markets had done such a poor job of policing themselves. The headline on a dispatch that appeared on the website Slate captured the mood: “Davos Man, Confused.” Written by journalist Daniel Gross, the piece explained that, despite the confusion, there was a broad consensus at Davos that “[s]uccess is the work of Great Men and Women, while failure can be pinned on the system.” Or, as another journalist, Julian Glover noted in the UK’s Guardian: “The shock is real, the grief has hardly begun, but no one in Davos seems to think [this] means they should be less important or less rich.”

That would have involved a change of mindset, which was not what these economic overlords seemed inclined toward. After all, a key concept behind the economic order of the past few decades has been the central importance of individual talent—and the need to nurture it with abundant financial rewards. That way, so the idea goes, the brilliant in our midst would be lured to the top jobs that run the world. Ensuring the active participation of these giants among us was clearly understood to be worth a lot, and pay scales were adjusted accordingly, going through the roof at the upper end. Just because the global economy was now in a free fall hardly seemed like grounds to beat up the very people who’d played key roles in designing it.

So, in Manhattan, then-CEO of Merrill Lynch John Thain apparently saw no irony as he explained why he’d felt it necessary to pay $4 billion in executive bonuses to keep the “best” people on staff—right after those same overachievers had steered the company to a staggering net loss of $27 billion and, in the process, helped trigger the global economic meltdown. The decision of the Wall Street crowd to collectively pay themselves a record $140 billion in 2009—outstripping even their 2007 record—may have seemed odd under the circumstances, but then no one ever accused Wall Street bankers of being unduly modest, unassuming, or prone to self-doubt.

Away from the rarified air of Davos and Manhattan, doubts were beginning to appear. Some less-gifted types were now clamoring for change, even suggesting that cutting executive pay might induce the hypertalented to seek more socially useful employment in areas like teaching or health care. But a letter to the New York Times clarified the danger of this approach, making a compelling case for maintaining extravagant pay, even huge executive bonuses: “Without them, Wall Streeters will all look for other jobs. Do we really want these greedy, incompetent clowns building our houses, teaching our children or driving our cabs?”

~~~

As a result of the dramatic increase in the concentration of income and wealth at the top during the last few decades, the United States has become an extremely unequal society.

Before going any farther, we should point out that we are not against all inequality. On the contrary, some reasonable degree of inequality is not only acceptable and inevitable but even desirable because it allows for different rewards for different levels of individual effort and contribution. But what exists today in the United States—and to a lesser extent in Britain and Canada—is a level of inequality that is extreme compared to the rest of the advanced, industrialized world. Indeed, the level of inequality in the United States today is actually more considerably extreme than what exists in many developing countries, including India, Cambodia, and Nigeria, and even in many Middle Eastern countries, such as Egypt and Tunisia, where excessive inequality is widely believed to have played a role in sparking the Arab spring uprisings of 2009–2010.

Over the past three decades, virtually all the growth in American incomes has gone to the top 10 percent, with particularly large gains going to the top 1 percent and spectacularly large gains going to the top .01 percent. Between 1980 and 2008, the incomes of the bottom 90 percent of the population grew by a meager 1 percent, or an average of just $303. Meanwhile, over those same years, the incomes of the top .01 percent of Americans grew by 403 percent, or an average of a massive $21.9 million. The richest 300,000 Americans now enjoy almost as much income as the bottom 150 million. These high rollers make up an enormously rich and powerful class that can best be described as a plutocracy—not unlike the plutocracy of financial interests that dominated America back in the 1920s, when the opulence of the wealthy and their disproportionate influence over the political process was particularly blatant.

America’s return to plutocracy is all the more notable because, between the periods of extreme inequality of the 1920s and the extreme inequality of today, something very significant happened. During the intervening years—particularly the early postwar period, from the end of World War II until 1980—the United States achieved, as did many other industrialized nations, a degree of equality and egalitarian distribution of income rarely seen in any period of Western history. Certainly, it is striking to compare the fate of ordinary Americans in recent decades with the fate of ordinary Americans in the early decades after World War II. As mentioned in the last paragraph, the incomes of the bottom 90 percent of Americans grew by only 1 percent in the past three decades. But, in the 1950–1980 period, the bottom 90 percent did dramatically better, experiencing income growth of 75 percent, or an average of $13,222. Since the 1980s, however, the revival of plutocracy has had sweeping effects, profoundly changing the nature of American society and the lives of Americans. Yet, even as this remarkable transformation took place, the issue of inequality and its negative consequences largely disappeared from public debate—until the Occupy Wall Street movement boldly pushed the subject back into the limelight in the fall of 2011.

About the Authors

Linda McQuaig has developed a reputation for taking on the establishment. Author of seven Canadian best sellers and winner of a National Newspaper Award, she has been a national reporter for the Globe and Mail, a senior writer for Maclean's magazine, and a political columnist for the Toronto Star. Follow her on Twitter at @LindaMcQuaig and visit her website.

Author of three books, Neil Brooks is director of the Graduate Program in Taxation at Osgoode Hall Law School in Toronto. He has participated in building projects relating to income tax in Lithuania (through the Harvard Institute for International Development), Vietnam (Swedish International Development Agency), Japan (Asian Development Bank), China (AUSAid), and Mongolia (AUSAid).

The Rich and Hidden Political Influence of the Koch Brotherstag:typepad.com,2003:post-6a00e54ed2b7aa883301b8d2c5b3db970c2017-12-08T16:34:29-05:002019-08-23T09:37:48-04:00By Linda Quaig and Neil Brooks: Barely a month after Barack Obama had been sworn in as the forty-fourth US president, riding a wave of immense popular support with his “Yes, we can” rallying cry echoing around the country and the world, a voice seemed to appear from nowhere saying, “No, actually you can’t.” Ostensibly, it came first from Rick Santelli, a relatively obscure investment manager-turned-commentator on CNBC, who denounced Obama’s plans to help struggling American homeowners as “promoting bad behavior.” In a wide-ranging rant from the floor of the Chicago Mercantile Exchange on February 19, 2009, Santelli said, “We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m gonna start organizing.” Within hours, a protest movement had swung into action on the Internet, talk radio, and cable TV, and rallies were scheduled across the country for the following week.Beacon Broadside

Toward the end of November, the Meredith Corporation, owner of Family Circle, Better Homes and Gardens, and AllRecipies, agreed to buy Time Inc. for $3 billion. To help make the all-cash transaction possible, Charles and David Koch contributed $650 million. The billionaire brothers have been known to use their wealth and political connections to promote conservative causes. Meredith, however, stated in its announcement of the deal that they will “have no influence on Meredith’s editorial or managerial operations.” But as Linda McQuaid and Neil Brooks show us in this excerpt from Billionaires’ Ball: Gluttony and Hubris in an Age of Inequality, the brothers have a history of masking their influence to push for their interests. The future of such magazine titles as Time, Sports Illustrated, Essence, and People, now part of Meredith’s portfolio, remains to be seen.

***

Barely a month after Barack Obama had been sworn in as the forty-fourth US president, riding a wave of immense popular support with his “Yes, we can” rallying cry echoing around the country and the world, a voice seemed to appear from nowhere saying, “No, actually you can’t.” Ostensibly, it came first from Rick Santelli, a relatively obscure investment manager-turned-commentator on CNBC, who denounced Obama’s plans to help struggling American homeowners as “promoting bad behavior.” In a wide-ranging rant from the floor of the Chicago Mercantile Exchange on February 19, 2009, Santelli said, “We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m gonna start organizing.” Within hours, a protest movement had swung into action on the Internet, talk radio, and cable TV, and rallies were scheduled across the country for the following week.

To Mark Ames and Yasha Levine, journalists who had written for an expatriate newspaper based in Moscow, there was something fishy about the whole affair. “As veteran Russia reporters, both of us spent years watching the Kremlin use fake grassroots movements to influence and control the political landscape. To us, the uncanny speed and direction the movement took and the players involved in promoting it had a strangely forced quality to it.” Ames and Levine noted that, only hours after Santelli’s rant, a previously inactive website called ChicagoTeaParty.com, which had been registered six months earlier by a right-wing activist, sprung to life, declaring itself the official home of the Chicago Tea Party. Whether or not Santelli was part of deliberate plan to launch the Tea Party—he denies that he was—Ames and Levine quickly pointed out what other journalists have later confirmed: that the apparently spontaneous outburst of disaffected Americans was greatly helped along by an organized and sophisticated campaign ultimately funded by two of America’s richest men, Charles and David Koch.

In many ways, the emergence of the Tea Party as a potent force in American politics can be seen as the culmination of almost four decades of behind-the-scenes effort on the part of the billionaire brothers. The political views of the Koch brothers have always been on the extreme right, nurtured by their father, Fred Koch, a cofounder of the ultra-right-wing John Birch Society. Since inheriting his massive privately held oil fortune in the late 1960s, the brothers have been pouring untold millions of dollars into promoting libertarian causes. The probing of Ames and Levine, as well as a comprehensive, investigative piece by Jane Mayer in the New Yorker in August 2010, has shown that the brothers established a vast network of ultra-conservative political organizations, advocacy groups, publications, and think tanks. Included in this network is the high-profile Cato Institute, which has aggressively pushed for an end to Social Security, and the Mercatus Center, located at George Washington University, which has been a leading advocate of environmental deregulation and inaction on climate change. (Its scholars have reassured the public that “if a slight warming does occur, historical evidence suggests it is likely to be beneficial, occurring at night, in the winter and at the poles.”)

The brothers have mostly stayed out of politics directly (apart from David Koch’s stint as the vice presidential candidate for the Libertarian Party in 1980, positioned to the right of Ronald Reagan). Perhaps the Kochs sensed how politically toxic a couple of billionaires could be to a movement whose central aim has been slashing taxes on the rich and dismantling programs, like Social Security, that keep millions of Americans out of poverty.

Hence they’ve masked their involvement. But their fingerprints are all over groups that have played an essential role in fostering the Tea Party’s rise, particularly Americans for Prosperity, which David Koch started in 2004. In a rare speech to a celebratory AFP gathering in the Washington area in 2009, Koch confirmed his involvement: “Days like today bring to reality the vision of our board of directors when we started this organization five years ago.” Still, with Koch and his kingly lifestyle remaining mostly out of sight, AFP has been able to present Koch-funded political events as populist gatherings of ordinary citizens trying to fight vested interests. Advertisements for a 2010 summit called Texas Defending the American Dream, for instance, proclaimed, “Today, the voices of average Americans are being drowned out by lobbyists and special interests”—without mentioning that the event was being sponsored by two of America’s wealthiest men, whose lobbying and special interest pleading had become so extensive it was dubbed the Kochtopus decades earlier.

In fact, the Kochs were really just one—although a leading one—of the ultra-rich US families that in the 1970s turned their attention and directed their wealth to the task of pushing American politics sharply to the right and putting in place policies that more clearly favored their own interests.

About the Authors

Linda McQuaig has developed a reputation for taking on the establishment. Author of seven Canadian best sellers and winner of a National Newspaper Award, she has been a national reporter for the Globe and Mail, a senior writer for Maclean's magazine, and a political columnist for the Toronto Star. Follow her on Twitter at @LindaMcQuaig and visit her website.

Author of three books, Neil Brooks is director of the Graduate Program in Taxation at Osgoode Hall Law School in Toronto. He has participated in building projects relating to income tax in Lithuania (through the Harvard Institute for International Development), Vietnam (Swedish International Development Agency), Japan (Asian Development Bank), China (AUSAid), and Mongolia (AUSAid).

A State of the Union Reading Listtag:typepad.com,2003:post-6a00e54ed2b7aa883301b8d0c6558b970c2015-01-22T17:30:00-05:002015-01-22T17:46:24-05:00Putting the State of the Union in context: Eight books you should read.Beacon Broadside

President Obama delivered a fiery State of the Union earlier this week, immediately making headlines (and exploding the Twittersphere) for a now-famous ad-libbed line about winning both elections. Chatter about the unplanned quip, however, threatened to overshadow the more substantive parts of the President’s speech, in which he promised to tackle inequalities in income, education, and immigration as well as offering concrete measures for slowing climate change, benefiting veterans, closing tax loopholes, and the like. It was also, notably, the first time a President has used the word transgender during a State of the Union address.

For those looking for deeper insight into some of the issues Obama spoke about, we’ve created a State of the Union reading list, and highlighted a few specific titles below:

“Middle-Class Economics”

Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?

Billionaires’ Ball: Gluttony and Hubris in an Age of Epic Inequalityby Linda McQuaig and Neil Brooks

Between 1980 and 2008, the incomes of the bottom 90 percent of Americans grew by a meager 1 percent compared to a whopping 403 percent for the top .01 percent. We tend to regard these large fortunes as proof of a meritocracy, yet there is no evidence that members of today’s super-rich are any more talented or hardworking than were the elite of a generation ago. Via vivid profiles of billionaires—ranging from philanthropic capitalist Bill Gates and the infamous Koch brothers to brazen private equity baron Stephen Schwarzman—Billionaires’ Ball debunks the notion that they “deserve” their grand fortunes, when such wealth is really a by-product of a legal and economic system that’s become deeply flawed and is now threatening the quality of life and very functioning of our democracy.

(Not) Keeping Up with Our Parents: The Decline of the Professional Middle Class by Nan Mooney

The first book to exclusively target the struggles of the professional middle class-educated individuals who purposely choose humanistic, intellectual, or creative pursuits, Nan Mooney’s (Not) Keeping Up with Our Parents is a simultaneously sobering and proactive work that captures a diversity of voices.

Drawing on more than a hundred interviews with people all across America, Mooney explores how stagnant wages, debt, and escalating costs for tuition, health care, and home ownership are jeopardizing today’s educated middle class. Despite this difficult reality, Mooney offers concrete ideas on how individuals and society can arrest this downward spiral.

Education Reform

By the end of this decade, two in three job openings will require some higher education. Two in three. And yet, we still live in a country where too many bright, striving Americans are priced out of the education they need. It’s not fair to them, and it’s not smart for our future.

The Opportunity Equation: How Citizen Teachers Are Combating the Achievement Gap in America's Schoolsby Eric Schwarz

Parental wealth now predicts adult success more than at any point in the last hundred years. And yet as debates about education rage on, and wealth-based achievement gaps grow, too many people fix the blame on one of two convenient scapegoats: poverty or our public schools. But in fact, low-income kids are learning more now than ever before. The real culprit for rising inequality, Eric Schwarz argues in The Opportunity Equation, is that wealthier kids are learning much, much more—mostly outside of school. In summer camps, robotics competitions, sessions with private tutors, and conversations around the dinner table, children from more affluent families build the skills and social networks that propel them to success.

In The Opportunity Equation, Schwarz tells the story of how he founded the pioneering Citizen Schools program to combat rising inequality by bringing these same opportunities to children who don’t have access to them.

The Tyranny of the Meritocracy: Democratizing Higher Education in Americaby Lani Guinier

Goaded on by a contemporary culture that establishes value through ranking and sorting, universities assess applicants using the vocabulary of private, highly individualized merit. As a result of private merit standards and ever-increasing tuitions, our colleges and universities increasingly are failing in their mission to provide educational opportunity and to prepare students for productive and engaged citizenship.

To reclaim higher education as a cornerstone of democracy, Guinier argues that institutions of higher learning must focus on admitting and educating a class of students who will be critical thinkers, active citizens, and publicly spirited leaders. Guinier presents a plan for considering “democratic merit,” a system that measures the success of higher education not by the personal qualities of the students who enter but by the work and service performed by the graduates who leave. Guinier argues for reformation, not only of the very premises of admissions practices but of the shape of higher education itself.

Immigration Reform

Yes, passions still fly on immigration, but surely we can all see something of ourselves in the striving young student, and agree that no one benefits when a hardworking mom is taken from her child, and that it’s possible to shape a law that upholds our tradition as a nation of laws and a nation of immigrants.

Undocumented: How Immigration Became Illegalby Aviva Chomsky

In this illuminating work, immigrant rights activist Aviva Chomsky shows how “illegality” and “undocumentedness” are concepts that were created to exclude and exploit. With a focus on US policy, she probes how people, especially Mexican and Central Americans, have been assigned this status—and to what ends.

Blending history with human drama, Chomsky explores what it means to be undocumented in a legal, social, economic, and historical context. The result is a powerful testament of the complex, contradictory, and ever-shifting nature of status in America.

Dreamers: An Immigrant Generation's Fight for Their American Dreamby Eileen Truax

Of the roughly twelve million undocumented immigrants living in the United States, as many as two million came here as children. They grow up here, going to elementary, middle, and high school, and then the country they call home won’t (in most states) offer them financial aid for college, and they’re unable to be legally employed. In 2001, US senator Dick Durbin introduced the DREAM Act to Congress, an initiative that would allow these young people to become legal residents if they met certain requirements. More than a decade later, in the face of congressional inertia and furious opposition from some, the DREAM Act has yet to be passed. In recent years, this young generation of Dreamers has begun organizing, and with their rallying cry “Undocumented, unapologetic, and unafraid,” they are the newest face of the human rights movement. In Dreamers, Eileen Truax illuminates the stories of these young men and women, who are living proof of a complex and sometimes hidden political reality that calls into question what it truly means to be American. (Forthcoming March 2015)

Climate Change

The best scientists in the world are all telling us that our activities are changing the climate, and if we do not act forcefully, we’ll continue to see rising oceans, longer, hotter heat waves, dangerous droughts and floods, and massive disruptions that can trigger greater migration, conflict, and hunger around the globe. The Pentagon says that climate change poses immediate risks to our national security. We should act like it.

In Harvest the Wind, Philip Warburg tells the story of America’s energy future as it has not been told before. Cloud County is home to the Meridian Way Wind Farm, whose turbines are boosting farm incomes and bringing green jobs to a community that has watched its children flock to more exciting lives and less taxing jobs elsewhere. This remote corner of Kansas is the first stop on an odyssey that introduces readers to farmers, factory workers, biologists, andhigh-tech entrepreneurs--all players in a transformative industry that is fast taking hold across America and around the globe. Warburg describes America’s race to keep pace with competitors in China and Denmark, and looks closely at the health and environmental concerns that have aroused some angry wind-farm neighbors. He also describes what it will take to make wind energy a serious alternative to conventional fuels and nuclear power. Warburg draws from his work as a lawyer and policymaker on energy and environmental issues, and on his skills as a journalist to convey the human side of a story about bringing the American heartland back to life.

Early Spring: An Ecologist and Her Children Wake to a Warming Worldby Amy Seidl

In Early Spring, ecologist and mother Amy Seidl examines climate change at a personal level through her own family’s walks in the woods, work in their garden, and observations of local wildlife in the quintessential America of small-town New England, deep in the Green Mountains of Vermont.

Seidl’s testimony, grounded in the science of ecology and evolutionary biology but written with beauty and emotion, helps us realize that a natural upheaval from climate change has already begun: spring flowers blossom before pollinators arrive, ponds no longer freeze, and animals begin migrations at unexpected times. Increasingly, the media report on melting ice caps and drowning polar bears, but Seidl brings the message of global warming much closer to home by considering how climate change has altered her local experience, and the traditions and lifestyles of her neighbors, from syrup producers to apple farmers.

Why Billionaires Are Bad for Democracytag:typepad.com,2003:post-6a00e54ed2b7aa883301b7c6ffd16b970b2014-11-03T12:00:00-05:002014-11-04T11:42:44-05:00In an excerpt adapted from their 2012 book, Billionaires’ Ball: Gluttony and Hubris in an Age of Epic Inequality, Linda McQuaig and Neil Brooks explore the real origins of the Tea Party’s “grassroots” movement, and the secret world of the Koch brothers’ conservative money machine fueling America’s escalating inequality.Beacon Broadside

NEW YORK, NY - JUNE 05: Activists hold a protest near the Manhattan apartment of billionaire and Republican financier David Koch

Today is Election Day and, whatever our political affiliation, we can be sure that big money players with deep pockets will play a large part in the outcome. Which is exactly how they want it. Between 1980 and 2008, the incomes of the bottom 90 percent of Americans grew by a meager 1 percent compared to a whopping 403 percent for the top .01 percent. In an excerpt adapted from their 2012 book, Billionaires’ Ball: Gluttony and Hubris in an Age of Epic Inequality, Linda McQuaig and Neil Brooks explore the real origins of the Tea Party’s “grassroots” movement, and the secret world of the Koch brothers’ conservative money machine fueling America’s escalating inequality.

Barely a month after Barack Obama had been sworn in as the forty-fourth U.S. president, riding a wave of immense popular support with his “Yes, we can” rallying cry echoing around the country and the world, a voice seemed to appear from nowhere saying, “No, actually you can’t.” Ostensibly, it came first from Rick Santelli, a relatively obscure investment manager-turned-commentator on CNBC, who denounced Obama’s plans to help struggling American homeowners as “promoting bad behavior.” In a wide-ranging rant from the floor of the Chicago Mercantile Exchange on February 19, 2009, Santelli said, “We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m gonna start organizing.” Within hours, a protest movement had swung into action on the Internet, talk radio, and cable TV, and rallies were scheduled across the country for the following week.

To Mark Ames and Yasha Levine, journalists who had written for an expatriate newspaper based in Moscow, there was something fishy about the whole affair. “As veteran Russia reporters, both of us spent years watching the Kremlin use fake grassroots movements to influence and control the political landscape. To us, the uncanny speed and direction the movement took and the players involved in promoting it had a strangely forced quality to it.” Ames and Levine noted that, only hours after Santelli’s rant, a previously inactive website called ChicagoTeaParty.com, which had been registered six months earlier by a right-wing activist, sprung to life, declaring itself the official home of the Chicago Tea Party. Whether or not Santelli was part of deliberate plan to launch the Tea Party—he denies that he was—Ames and Levine quickly pointed out what other journalists have later confirmed: that the apparently spontaneous outburst of disaffected Americans was greatly helped along by an organized and sophisticated campaign ultimately funded by two of America’s richest men, Charles and David Koch. In many ways, the emergence of the Tea Party as a potent force in American politics can be seen as the culmination of almost four decades of behind-the-scenes effort on the part of the billionaire brothers.

The political views of the Koch brothers have always been on the extreme right, nurtured by their father, Fred Koch, a cofounder of the ultra-right-wing John Birch Society. Since inheriting his massive privately held oil fortune in the late 1960s, the brothers have been pouring untold millions of dollars into promoting libertarian causes. The probing of Ames and Levine, as well as a comprehensive, investigative piece by Jane Mayer in the New Yorker in August 2010, has shown that the brothers established a vast network of ultra-conservative political organizations, advocacy groups, publications, and think tanks. Included in this network is the high-profile Cato Institute, which has aggressively pushed for an end to Social Security, and the Mercatus Center, located at George Washington University, which has been a leading advocate of environmental deregulation and inaction on climate change. (Its scholars have reassured the public that “if a slight warming does occur, historical evidence suggests it is likely to be beneficial, occurring at night, in the winter and at the poles.”)

The brothers have mostly stayed out of politics directly (apart from David Koch’s stint as the vice presidential candidate for the Libertarian Party in 1980, positioned to the right of Ronald Reagan). Perhaps the Kochs sensed how politically toxic a couple of billionaires could be to a movement whose central aim has been slashing taxes on the rich and dismantling programs, like Social Security, that keep millions of Americans out of poverty.

Hence they’ve masked their involvement. But their fingerprints are all over groups that have played an essential role in fostering the Tea Party’s rise, particularly Americans for Prosperity, which David Koch started in 2004. In a rare speech to a celebratory AFP gathering in the Washington area in 2009, Koch confirmed his involvement: “Days like today bring to reality the vision of our board of directors when we started this organization five years ago.” Still, with Koch and his kingly lifestyle remaining mostly out of sight, AFP has been able to present Koch-funded political events as populist gatherings of ordinary citizens trying to fight vested interests. Advertisements for a 2010 summit called Texas Defending the American Dream, for instance, proclaimed, “Today, the voices of average Americans are being drowned out by lobbyists and special interests”—without mentioning that the event was being sponsored by two of America’s wealthiest men, whose lobbying and special interest pleading had become so extensive it was dubbed the Kochtopus decades earlier.

In fact, the Kochs were really just one—although a leading one—of the ultra-rich U.S. families that in the 1970s turned their attention and directed their wealth to the task of pushing American politics sharply to the right and putting in place policies that more clearly favored their own interests.

The impact on the Republican Party has been the most profound, with conservative money ensuring that moderates in the style of Dwight Eisenhower—or even George H. W. Bush—are increasingly blocked from winning their party’s nominations. Two well-financed conservative pressure groups have been instrumental in this. The Club for Growth has proved highly effective in weeding out, early on, any Republicans who dare to deviate from a tax-cuts-for-the-rich agenda. Founding president Stephen Moore (who worked at both the Heritage Foundation and Cato Institute) noted that when he approached wealthy donors for money to use against such candidates in primary contests “they start wetting their pants.” Similarly, Americans for Tax Reform, headed by the immensely influential lobbyist Grover Norquist, has helped impose a rigid antitax agenda on Washington by coercing Republicans into signing the organization’s pledge to oppose all efforts to increase tax rates on business and the high-income crowd. Although some moderate Republicans originally resisted, increasingly they’ve succumbed. By September 2011, 236 congressmen and 41 senators had signed the pledge, giving antitax automatons a majority in the House and sufficient votes to prevent legislation from coming up for a vote in the Senate.

The impact of conservative money on the Democratic Party has also been immense. With increasingly expensive political campaigns in the TV age, business gained a huge advantage with cash-hungry Democratic candidates, particularly after labor’s economic clout and financial contributions diminished. As labor faded, the well-financed voices of business grew louder and more persistent, aggressive, and ubiquitous. Democrats became the new scared-e-cats, retreating in lockstep as the conservative juggernaut advanced, putting up scant resistance as the goalposts were moved ever farther to the right. The Democrats largely abandoned support for important labor policies, allowing the minimum wage to languish, supporting trade deals that encouraged privatization and favored corporate interests, and even emerging as the leading proponents of financial deregulation in the 1990s. This brought in huge campaign support from the financial industry, realigning the party with Wall Street, particularly under the influence of powerful Democratic senators Charles Schumer and Joseph Lieberman.

The Democrats have held out somewhat on the tax issue. They’ve mostly resisted signing the tax pledge, and have recently supported Obama’s calls for higher taxes on the rich, including his “Buffett rule” plan to make those earning more than a million dollars a year pay tax rates as high as the middle class. But these measures—while sharply resisted by the Right—still represent a huge retreat from the meaningfully progressive tax policies championed by the Democratic Party all the way back to the end of the nineteenth century, during the Depression and the early postwar years. The enormous decline in the taxation of the rich over the past thirty years could not have happened without the almost complete capitulation of the Democratic Party.

This broad retreat from progressive causes was painfully evident as early as 1978. Despite Democratic control of Congress and the White House, a highly organized and well-financed campaign by business, led by the Business Roundtable, helped orchestrate the defeat of an important piece of labor legislation in the Senate after a nineteen-day filibuster—a devastating defeat that seemed to confirm labor’s waning influence, even with its Democratic allies. This was followed by an even more surprising Democratic retreat on the tax front. While President Jimmy Carter had campaigned on promises to make the tax system more progressive, a Democratic tax bill that started out with provisions for higher capital gains taxes was quickly gutted after a major lobbying effort by business. In the end, the Democratic-controlled Congress passed a bill that did exactly the opposite—cut the capital gains tax almost in half, slicing the rate from 48 percent to 28 percent. The Democrats had shown a willingness to play ball with the new moneyed interests in town, presiding over the first major victories of the conservative political revolution before Ronald Reagan even set foot in the White House.

ABOUT THE AUTHORS

Linda McQuaig has developed a reputation for taking on the establishment. Author of seven Canadian best sellers and winner of a National Newspaper Award, she has been a national reporter for the Globe and Mail, a senior writer for Maclean’s magazine, and a political columnist for the Toronto Star.

Author of three books, Neil Brooks is director of the Graduate Program in Taxation at Osgoode Hall Law School in Toronto. He has participated in building projects relating to income tax in Lithuania (through the Harvard Institute for International Development), Vietnam (Swedish International Development Agency), Japan (Asian Development Bank), China (AUSAid), and Mongolia (AUSAid).